With the difficult economy of today, it’s common for homeowner associations to look into making their HOA Clubhouse available for rent to non-members for an additional income source. It seems like a great idea, but HOAs must be careful to know the rules contained in the Association’s governing documents.
First and foremost, the Association should have their attorney look at the governing documents to make sure they have the authority to rent out the clubhouse to those who aren’t members of the Association.
In the act of renting out the space, the association becomes a business rather than just a volunteer organization like usual. For this reason, insurance may not cover the space when used by non-members. Master policies tend to only cover usage of property by members of the HOA. You can also get an HOA management company like Cedar Management to assist you.
However, there still may be some options to ensure coverage. For example, some HOAs will enter into an agreement so that the non-member who is renting the clubhouse buys insurance of their own in order to secure the Community Association in all liabilities for causes of action or claims that could come from or be connected to the use of the clubhouse and the act of renting it. The downside to this is that if a person does end up injured from use of the clubhouse, they could equally take action against both the HOA and the person renting the property.
Although a renter will be able to provide proof of insurance through a Certificate, the insurance agent for the Association will still need to review the policy beforehand to know for sure what all is actually covered.
The bottom line is that you’ll want to avoid worst-case scenario where the injured person presses charges and the renter lacks the needed assets or insurance, then making your HOA responsible for the fees involved. To avoid relying on the renter to provide their own insurance, Associations should look adding their own addition insurance to protect their HOA.